Time to reach agreement on pensions

Now that the Retirement Reform Task Force has issued its findings, it is imperative that city officials act quickly to resolve costly pension issues.

“Unless reform is accomplished soon, the city’s quality of life will continue to decline because of the increasing burden that pension obligations will have on the city’s financial resources,” the task force warned in the report given to the mayor and City Council Thursday.

Although similar alarms have been issued repeatedly in recent years, pensions remain “the single most important issue facing the city today,” the task force concluded.

Unfortunately, taxpayers must suffer the financial consequences of bad policy decisions on pensions. But a bad situation will only worsen unless strong leadership comes into play.

Mayor Alvin Brown and City Council President Bill Gulliford pledged to move with dispatch to act on the recommendations in the 50-page report. The city’s public safety unions need to join them, using the task force report as a framework to begin open collective bargaining.

One test of success will be whether major issues are resolved in time for the next budget year, which begins Oct. 1. Any further delays will result in needless and unaffordable costs to taxpayers.

The task force report sheds light on how Jacksonville’s pensions got so out of kilter, and its sound recommendations are fair to public safety employees and taxpayers alike.

BLUEPRINT FOR A SOLUTION

As part of shared sacrifice, which this page has advocated all along, police and fire unions must agree to modest reductions in future benefits if taxpayers are asked to pay more to resolve what can aptly be called a pension crisis.

■ Taxpayers need to endure increased taxes for up to 14 years to pay down the unfunded liability of at least $1.7 billion. Failure to deal with it head-on will result in the costs continuing to escalate.

Specifically, the task force calls for a half-cent sales tax increase for up to 14 years, which would follow an initial one-year property tax increase.

■ For police and fire employees, benefits already earned by current employees and benefits of retirees would not be affected.

■ Current employee contributions would be increased from 7 to 8 percent of pay and would subsequently be increased to 10 percent but only after pay increases. New employees would start out at 10 percent.

The annual cost-of-living increase would change from a guaranteed 3 percent to the lower of 1.5 percent or the Consumer Price Index,.

That’s more in line with other cost-of-living formulas.

For new employees, normal retirement would be age 62 or after 30 years of service; early retirement could be available after 25 years.

Even with those reasonable changes, city employees would enjoy retirement benefits that are substantially more generous than most in the private sector.

■ Governance changes would improve administration of the Police and Fire Pension Fund and bring its overhead costs more in line with other funds, including the city’s General Employees Pension Plan. Changes also should lead to improved investment performance.

The 17 members of the task force, led by attorney Bill Scheu, devoted hundreds of hours and provided a signature service to the community.

Their work builds upon earlier work by the Jacksonville Community Council Inc., the city’s TRUE Commission, the Jacksonville Civic Council and others.

TIME TO ACT RESPONSIBLY

The task force adopted its report unanimously.

That unanimity should make it easier for the city and the unions to reach agreement and move forward — unless egos, political calculation and greed become obstacles.

Since any changes are likely to reduce their benefits, the police and fire unions may have little incentive to settle soon.

But they run the risk that unreasonable delays or an adverse court ruling could put their future benefits in greater jeopardy than a timely, reasonable settlement.

Brown, who needs to resolve the pension issue before heading into a re-election campaign, has unwisely rejected any tax increase to solve the problem.

That stance may cripple his role in finding a solution.

State and federal courts could play a part in further delays as battling continues over the legality of an agreement in 2001 between the city and the unions.

That ill-advised agreement bestowed generous benefits for 30 years that have become unaffordable to the taxpayers.

Basic services like libraries and roads have already suffered because of skyrocketing pension payments.

The future of Jacksonville is in the balance.

It’s time for Jacksonville leaders to be bold once again.

If they aren’t, Jacksonville may join the communities of Detroit and Stockton, Calif., in a civic hall of shame.

LD-- Sorry but I considered the statement "You and those of your ilk are the entire problem" to be a personal attack.

Maybe what we should do is eliminate the constituional right stated by the Supreme Court of citizens to move so people like me could not move when one community's tax rates become excessive compared to surrounding counties. Also Judge Learned Hand ruled that citizens have the right to arrange their affairs to minimize their tax burdens. Perhaps we need legislation to eliminate that right also. Once you do that than you can raise property taxes higher than the surrounding areas and people couldn't leave.

Also on the rental properties, I wish I could simply pass the increased costs on to the tenants but unfortunately the rental rates are set by the marketplace not by me. The effect of higher tax rates is to lower the value of property. Remember the value of the property is simply the present value of its future income. Raising taxes reduces the value of that income and thus the value of the property. Right now property taxes are slightly more than two months of rent or close to a 20% gross tax on rent. Let me state that again--property taxes are roughly 20% of the rental income. That seems like a high gross income tax to me.

By the way my moving actually helps the tax position of the City as my house was homestead protected and the assessed value is up almost 70%. The tax revenue from the house will be substantially higher than it would be had I stayed--so actually people like me and "of my ilk" are helping address the problem, not worsening it.

You do not seem to address the point of my original post so I will say it again--if you raise taxes significantly higher than those of the surrounding counties, people will choose to live in those counties rather than in Duval County. That is the reality and the problem Jacksonville faces---not people like me and those "of my ilk." It is no different than it is for businesses. How do we get them to relocate here--we give them tax incentives versus the other communities that they are considering. People are no different.

Has it occurred to any other observers that it may well suit a lot of people to not reach any quick agreement to rectify the pensions? It gives the administration and City Council both quite a "hammer" with which to deal with the police and fire unions, as well as for both administration and Council to use for politics, posturing, and personal agendas.

You make good points. My biggest concern though Is that historically the board has not done well at managing money.
I would want a little better assurance. Maybe we need a new and more professional board
Regards

Bill Gulliford

Sent from my iPhone Sep 26, 2013

The above is an email from Mr. Gulliford in response to an essay I wrote about the process of recycling idle city property at fair market value to the police and fire pension fund. The mistrust between all parties is causing economic failure.

A recent audit by the city indicated the pension was properly run. However, many hold past performance as an issue citing poor performance. It is disingenuous to hold the pension accountable for a poor performance in a poor economic environment which is and was struggling through a serious financial crisis.

The city said it was making an inventory of idle properties. There was no follow through on the plan to liquidate the properties to ease the city's financial pain. “Historically”, the pension had previously processed city property in exchange for a reduction of the pension funding liability. This was successful and proved what can be done.

All idle city properties must be assessed with fair market value and good will and listed for disposal. The potential profitability of a project can be used to assess good will. In other words, city transfers of idle property to police and fire pension fund must include good will.

Mayor Brown has everyone and their brother advising him on the best choices on all issues. I believe the idle property inventory, fair market and good will assessment, and disposal didn't receive the time and commitment because of a variety of reasons. It was either the downtown authority wanted control of the properties, or the wait for the audit, or it was the wait for the pension reform committee's review, whatever the reason, it is beginning to dawn on more than the mayor, the pension liability weakens all other projects- from downtown revitalization to keeping commitments.

Now the bond rating agencies (vultures) are circling- a down grade will make it more costly to borrow in the future.

The idea of JEA bailing out the pension fund was a bad idea, but what can the mayor do when inaction by the city council leads to a desperate increase in taxes (at the last minute) instead of working in to the gut of the issue by solving it.

[The reason JEA is in trouble is because it will take years for JEA to work it's way out of debt. Never do we hear about JEA debt load and it is serious(JEA debt is one of the largest among municipal utilities). In Austin the city utility has a 2020 program, 20% of energy from wind and solar by 2020( many other cities have the same plan) I propose a 2020 program for JEA- 20 % reduction in pay and 20% reduction in staff by 2020. JEA has failed miserable at being a municipal utility. The high debt load should never have been authorized.]

In conclusion, the city council doesn't want to work with the police and fire pension fund nor the mayor. Mr. Gulliford's email is indicative of a hostile attitude toward the pension. There is no negotiation.

The city council's, Mr. Gulliford's and the pension reform committee's solution is a horrendous tax regime for a city losing it's primary revenue generator- military spending.

The risk of more economic fallout is real. A deal needs to be made now before more damage is done.

No personal attack at all Hoosier 1945. Just making sure you represented yourself truthfully since you don't seem capable.

As for the properties you still own, you're just passing those costs on to your renters and you're likely not going anywhere regarding those investments. But if you do leave, hey, good luck. And I can only hope the folks buying your properties will , unlike you, understand the fact that in order to have services, you actually have to pay for them.

LD--I am sorry that you get upset and resort to personal attacks when I state a simple fact. The simple fact is Higher property taxes in Duval County are one of the things causing people to move or locate to surrounding counties with lower taxes. By the way, it does matter to me as I still have six properties in Duval County. I suspect I pay significantly more property tax than you do. Don't worry about it because I will not be investing any more. High property taxes have caused me to move my investing to surrounding counties. It is people like me who are leaving because of the higher taxes. If you don't want people like me to invest in Duval County, make it uncompetitive for us to invest there. We will go where we are welcome